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posted on 01 February 2016

Early Headlines: Asia Stocks Tepid, China Mfg Weakens, Global Market Fears, Largest Wealth Transfer Ever, US Money Launderers, Why QE Doesn't Work In Europe And More

Written by Econintersect

Early Bird Headlines 01 February 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.



  • Asia stocks edge up after Japan policy boost; debt shines (Reuters) Asian stocks started a new month on a cautious note on Monday, with the Bank of Japan's surprise policy easing sparking some buying but further signs of economic weakness in China and a fall in oil prices keeping investors on guard. European stocks were broadly expected to open steady with spreadbetters expecting Britain's FTSE 100 .FTSE to open up 0.4%, Germany's DAX .GDAXI to open 0.2% higher, and France's CAC 40 .FCHI to be unchanged. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.1%, after losing 8% in January. Australia and Japan .N225 led regional markets with gains of 0.8% and 2%, respectively, while Chinese stocks .SSEC.CSI300 slipped in afternoon trade.

  • The Three Fears Sinking Global Markets (Anatole Kaletsky, Project Syndicate) Why did January, normally a good month for stocks, lay such an egg? Kaletsky explains why three things are major reasons for this:

"Three fears now seem to be influencing market psychology: China, oil and the fear of a US or global recession."

  • BofA: The Oil Crash Is Kicking Off One of the Largest Wealth Transfers In Human History (Bloomberg) A new note from Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil move into a much bigger perspective, arguing that a sustained price plunge "will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history". The not also projects only a modest growth in oil consumption going forward (after a big increase in 2015) even with low prices for several years.




  • The Shortcomings of Quantitative Easing in Europe (Martin Feldstein, Project Syndicate) Hat tip to Rob Carter. Prof. Feldstein explains why he thinks QE was much more successful (inflating asset values and GDP) than it has been in Europe (where objectives were different - increasing exports by deflating the euro). But economic activity (GDP) has been relatively unresponsive. Th impact economic activity Feldstein says "individual countries need to depend less on quantitative easing by the ECB and focus squarely on structural reforms and fiscal stimulus".

    Econintersect: The meaning of fiscal stimulus is easily understood (increase government deficit spending) but wtf are "structural reforms"? That is a nebulous term that can mean anything the user of the term might want. Feldstein doesn't give a hint what he means. For many it means austerity, but that cannot be what Feldstein means if he suggests fiscal stimulus. Or maybe he does mean some combination of deficit spending and labor wage repression? Feed the 1% with deficit spending and take from the 90%? Come on professor, double talk is not helping and we may assume the worse if you insist on being so unclear. For a good discussion on "structural reform" see John Aziz: What are Structural Reforms? (Pieria).

  • The EU's mask has slipped: Political union is all that matters (City A.M.) John Hulsman opines that last week's Open Europe War Game revealed a great deal about the European elite's objective of a politically unified Europe. And he says "that simply will never successfully exist". Econintersect: And if Hulsman is correct then we say the euro is doomed.


Saudi Arabia

  • Saudi Arabia struggles to cope with cheap oil (CNBC) Saudi Arabia has been forced to cut government spending in its upcoming budget and increase production of crude oil - even though its hardly worth pulling it out of the ground. Still, the world's largest producer of oil appears on a crash-course for bankruptcy as early as of 2018, according to a new Big Crunch analysis. The graph below is animated in the article.




  • China official PMI misses in January, Caixin PMI shows contraction (CNBC) China's official factory activity skidded to a three-year low point in January, adding to further gloom about the state of the world's second-largest economy. The government-compiled January manufacturing purchasing manager's index (PMI) came in at 49.4, slightly missing Reuters consensus estimates for a 49.6 reading and ticking down from December's 49.7 figure. It was the weakest result since 2012 and marked the sixth straight month in contraction territory. The mood was worsened by a private survey by Caixin and Markit that showed January manufacturing activity shrinking for the eleventh straight month. Caixin's survey, which tracks smaller firms than the official indicator, came in at 48.4, compared to December's reading of 48.2. A score below 50 indicates a contraction in the sector, while one above 50 means expansion.

  • China officials punished over wrongful execution of teen (BBC News) Twenty-seven Chinese officials have been penalised for the wrongful execution of a teenager. Huugjilt was 18 when he was convicted of the rape and murder of a woman in a factory's public toilet in 1996. A serial rapist confessed to the crime in 2005 and Huugjilt was formally exonerated in 2014. Acquittals are extremely rare in China and it is even rarer for convictions to be overturned.

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